Car insurance market to be scrutinised

| September 28, 2012 | 0 Comments
Car insurance market to be scrutinised

The high cost of car insurance premiums has prompted an investigation into the market amid concerns that it is dysfunctional and not working well for motorists.

The Office of Fair Trading (OFT) has referred the private motor insurance market to the Competition Commission because if believes that the way the market is structured is pushing premiums up to unnecessarily high levels.

The OFT decided in May that the market was not working properly and has finally referred the issue to the Competition Commission following a public consultation.

In its own investigation, the OFT found that the insurers of drivers found to be at-fault in causing an accident, had no control over how much insurers of ‘not-at-fault’ drivers spent on repairs or replacement vehicles.

If found that overly expensive replacement vehicles were being provided by insurers, sometimes for longer than necessary, in return for referral fees from car hire firms.

Repairs were found to be unnecessarily expensive, by £155 on average, than they needed to be.

Again, the problem was found to lie with the referral system, with garages paying the lucrative fees to insurers.

The Competition Commission investigation was welcomed by the Association of British Insurers (ABI).

Nick Starling, director of general insurance at the ABI said: “Regulation of all players in the market to tackle excessive costs is needed, and we look forward to working with the Competition Commission to bring much needed reforms to the market that will, in turn, result in lower car insurance premiums for everyone.”

A recent report by comparison website suggested that car insurance premiums have fallen by 10.6 percent due to greater competition between insurers.

The biggest fall in car insurance costs was enjoyed by motorists in Cleveland, where they fell by 14 per cent, while prices for London motorists fell by just three per cent.

Kevin Pratt, insurance spokesman at MoneySupermarket, said: “The main factor influencing the cost of car insurance is competition in the market.

“A few key insurance providers are looking to take on new business and are willing to offer low premiums to attract customers.

“While this continues, drivers will benefit – but there is no guarantee how long it will last.”

Tags: ,

Comments (0)

Trackback URL | Comments RSS Feed

There are no comments yet. Why not be the first to speak your mind.

Leave a Reply

Visited 1361 times, 14 so far today